http://www.adage.com/news.cms?newsId=36528. Group Ten Presents: http://www.adage.com/news.cms?newsId=36528. Emory Redd Abby Weaver George Chambers. eBay Outline: Group 10. Consumers Budget Lines : Weaver Law of Diminishing Marginal Utility: Weaver Advertising: Weaver
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Emory Redd Abby Weaver George Chambers
Founded in 1995 by Pierre Omidyar
Bills itself as “The world’s online market place”
“Our mission is to build an online marketplace that enables practically anyone to trade practically anything anywhere in the world”
1998: 300,000 users; and $200 million in gross merchandise sales
2002: 42,000,000 users; $9 billion gross merchandise sales
A decrease in the price leads to either a rightward rotation of the budget line or causes the budget line to rotate upward, leaving the horizontal intercept unaffected.
When the price of a good changes,
the budget line rotates:
Both it's slope and one of its
intercepts will change.
utility is the pleasure or satisfaction obtained from consuming goods and services.
Marginal utility is the change in utility an individual enjoys from consuming an additional unit of a good.
As consumption rises, so does total utility.
Marginal utility falls as consumption rises, indicating that each additional unit provides less additional utility than the previous unit did.Utility and Marginal Utility
Survey Results: satisfaction and usage will increase as eBay becomes more popular.
To the Consumer: consuming goods and services.
* time spent searching for an item
* time spent waiting for the bid to end
* shipping costs
* mailing time
* eBay relocated to Delaware in April 1996 to avoid the high taxes that California was charging. All of the money spent moving could have been used better elsewhere.
Amazon.com CEO consuming goods and services.Jeff Bezos
Singing Dancing"Do It eBay" Guy
Employees have both General and Specific Human Capital
General Human Capital
Knowledge or training beneficial to many firms
Specific Human Capital
Knowledge or training beneficial to only one firm
Meg Whitman, CEO of eBay
Meg Whitman, CEO of eBay
MBA from Harvard
-Many specialized Auction sites
- eBay 2002 annual report
Characteristics of eBay’s market:
It’s a Monopolistic Competition
Stock prices and demand curves
Causes of demand curve shift
As P increases, so does Q consuming goods and services.
Directly proportionalThe Law of Supply
change in nonprice determinants consuming goods and services.
Shift to the right increases supply, shift to the left decreases supplyA Shift of the Supply Curve
As P increases, Q decreases consuming goods and services.
Inversely proportionalThe Law of Demand
Change in nonprice determinants consuming goods and services.
Shifts to the right increase demand, shifts to the left decrease demandA Shift of the Demand Curve
Together, supply and demand form a market with an equilibrium price
The market for eBay is imperfectly competitiveSupply + Demand = Market
To maximize profits
Two kinds of Profit
Total revenue minus accounting costs
Total revenue minus all costs of productionProfit Maximizing
Where the MC and MR curves intersect
Operating at this level will maximize profitsWhat output level Should eBay Operate At?
eBay has become the number one auction site. It has 5.6 million registered users and more than 12 million items for sale at any one time. In 1999, they moved $2.7 billion in merchandise revenue which nearly doubled Amazon’s $1.4 billion. eBay has been on its way up since they first started in 1995. It has successfully reached the top and continues to grow.